Under the right circumstances, timeshares can be a great way to take advantage of regularly traveling and getting away from all the mundane of life. But, timeshares are also often a misunderstood asset. If you’re considering investing in a timeshare (or if you’ve already bought into one), you can take action to protect it - just as you would with a house, investments, savings or any other asset you own.
Learn how timeshares and estate planning work, so you can enjoy the memories you’ve made there for years (if not generations!) to come.
What Happens to Timeshares When the Owner Dies?
When the owner of a timeshare property passes away, the timeshare itself becomes part of the decedent’s (the person who passed away) estate, just like any other asset would. In the best case scenario, you would have set up your Estate Plan to include any timeshare property you buy into. Proper estate planning allows you to legally note who should inherit the timeshare. It’s important to keep in mind that once ownership is transferred, it’s the inheritors who then become the legal owners. This means they also become responsible for taking over the fees associated with timeshare ownership.
Even if your timeshare isn’t appropriately and specifically included in your Estate Plan, it’s likely that you already made a decision about inheritance when you originally purchased it. Most timeshare agreements have what’s known as a “Perpetuity Clause” written into the contract. This clause states that you’re the owner of the timeshare for your life, and when you pass away, ownership would become part of your estate. At that point, responsibility to pay any fees would be inherited by your estate, next-of-kin or a designated Beneficiary.
A few things to keep in mind when you’re trying to figure out how your timeshare best fits into your overall Estate Plan:
Co-Trustees: What happens if a Beneficiary either doesn't want your timeshare or if they’re unable to financially keep up with it? One easy way to handle this is by simply naming whomever would inherit your timeshare as Co-Trustee up front. Co-Trustees have the right to decide on their own, when the time comes, if they want to keep a timeshare (absorbing all the costs), sell it or simply abandon it. The Co-Trustee title is one way to release both a Beneficiary, as well as your estate, from the responsibility of having to pay ongoing fees after you pass away.
Probate: Depending on how they’re originally titled, timeshares may be subject to probate. Probate is an expensive, time-consuming, often stressful (for your heirs) court proceeding that certain parts of your estate may go through after your death. During the probate process, Beneficiaries cannot use a timeshare property, but all maintenance and other fees must still be paid (by your Executor and out of your estate).
Joint Tenants: If you title your timeshare as Joint Tenants, upon your passing, ownership will simply go to your spouse (or whomever is on the title with you). Probate can be avoided until the surviving owner passes away, but at that point, it will likely then have to go through the probate process.
Trust: There is a way to keep a timeshare out of probate though. You can place it inside a Revocable Living Trust, which makes the Trust the legal owner of the timeshare and, like with all Trust-owned assets, removes probate from the scenario entirely. The terms of the Trust will have explicit instructions about how the timeshare should be transferred to a Beneficiary after your passing.
Do Timeshares Get Passed Onto Children?
Timeshares are designed to allow you to buy into a fraction of a vacation property. When they’re thoughtfully set up, you can vacation there periodically during your lifetime and then transfer ownership to your children so they can enjoy it even after you pass away.
But, not all timeshares are set up the same way. Deeded Timeshares offer the most classic sense of property ownership. Owning a Deeded Timeshare means you can sell it, rent it out, give it (and its fees) to someone, or leave it in your Will for your children (or another Beneficiary).
Can You Refuse to Inherit a Timeshare?
In short, yes, you can refuse to inherit a timeshare. While the laws for rejecting an inherited timeshare can vary from state to state, the actual process will generally be the same and is known as “Renunciation of Property.”
If you plan to refuse a timeshare inheritance:
First, you want to act fast - Do not put off dealing with an inherited timeshare. You only have a certain amount of time to refuse a timeshare property. If you are planning on refusing, it’s important that you do not use or rent out the timeshare after the owner’s death, or you risk giving up your right to refuse the inheritance.
Next, you need to draw up a Renunciation Document - This should include:
A description of the timeshare property
A formal statement declaring your renunciation
Your name and signature
Be sure to make several copies and to send one (it’s best to send it through Certified Mail) to the timeshare company and the Executor of the estate (if that’s not you). You want to keep a copy, as well.
Finally, if the property was Willed to you and the estate is in probate - You should file a copy of the Renunciation Document with the probate court. This will ensure you’re protected in case your renunciation is ever questioned.
How to Protect Your Timeshare in Your Estate Plan
Just like with any asset you work hard to enjoy, it’s important to protect your timeshare. While it may be possible to use your Will to pass the timeshare on to inheritors, remember that, as we discussed, this will result in probate. Using other estate planning tools in advance can help - your loved ones will be able to save both time and money after you pass away.
You have a couple options for setting up timeshare ownership in your Estate Plan, including:
Add it to Your Revocable Living Trust: Offers a way to avoid probate and may offer tax benefits. Eliminates potential issues that can be created as a result of adding Beneficiaries directly to the title.
Title it as Joint Tenants: Only a good option for adult children/Beneficiaries. Like a Trust, Joint Tenant titles can avoid probate. However, remember that any time you add additional owners to any type of asset, things can become complicated - you’re essentially giving up some sense of control. There’s also less protection with this route, as creditor claims could be made against the property (which is not the case for assets protected inside a Trust).
While traditionally, setting up an Estate Plan has been an expensive and time-consuming process, using online services like those offered by Trust & Will makes it simple and streamlined. You can include your timeshare in your Revocable Living Trust, so your loved ones won’t have to deal with the headaches of transferring ownership after you pass away. Or, you can use your Will to leave the property to a loved one.
Timeshare ownership isn’t right for everyone. But for those who love the idea of having somewhere to get away to, without necessarily having to commit to the responsibility of traditional vacation-home-ownership, it might be a good option. Just make sure that you take the time to really understand what timeshares actually mean and how you can best-protect your investment through proper estate planning that includes the property.
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